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Can the Federal Government Tell Us What We Can and Cannot Do with Our Personal Property? — A Moratorium on Drilling in the Allegheny National Forest Has Implications for Oklahoma and Other States

Can the Federal Government Tell Us What We Can and Cannot Do with Our Personal Property? — That’s Exactly What The Obama Administration is Doing by Imposing a Moratorium on Drilling in the Allegheny National Forest Has Implications for Oklahoma and Other States.

There is a very quiet battle going on about which most real estate professionals are unaware. However, its outcome has far reaching consequences underpinning everything we sell, no matter where we sell real estate in these United States, be it Pennsylvania or Oklahoma. I’m talking about the struggle for the acquisition and control of the severed mineral estate which underlies the surface estate — the chocolate cake under the icing — personal property underneath the real estate. The issues at stake are the erosion of private property rights and the freedom to do what we want with our own personal property.

Keep in mind that oil, gas, and minerals are considered to be real estate until they are severed from the surface estate. Once the oil, gas and other minerals are severed from the surface estate, they have become personal property.

Far from the stimulating the economy, the Obama administration has chosen instead to eliminate jobs and stifle economic productivity in one of the more economically depressed areas of the country at a time when jobs are scarce.

In a blog which I posted back in October, I described the gradual erosion of property rights and the federal government’s attempt to seize power from the Commonwealth of Pennsylvania. Today’s blog is an update to that previous blog.

The Obama administration has admitted defeat, settled the lawsuit over the exploration of minerals in the Allegheny National Forest (the ANF), and has imposed a moratorium on energy exploration in the ANF. The article entitled, “Feds Settle ‘Sweetheart Suit’ – Kill Search for Energy,” was written by William Perry Pendley of the Mountain States Legal Foundation and is found on pages 17-18 of the November 2009 issue of Landman 2 (Vol. 7, no. 6). With the permission of the American Association of Professional Landmen (AAPL), I have reprinted the entire article. What follows are the words of Mr. Perry:

“August 27 marked 150 years since the first successful commercial oil well was drilled in Titusville, Pa. — thus beginning an oil and gas industry that has thrived across the country as well as within 40 miles of Titusville in the Allegheny National Forest (ANF). Not long ago, The Wall Street Journal reported renewed interest in the region’s Marcellus Shale given massive gas discoveries in the Barnett Shale in Texas, Fayetteville Shale in Arkansas and Haynesville Shale in Louisiana.

“The search in the ANF will have to wait, however, thanks to a “sweetheart lawsuit” by environmental groups and a decision by the Obama Administration to admit defeat, settle that lawsuit and impose a moratorium on energy exploration in the ANF.

“In June 2009, the Pennsylvania Oil and Gas Association (POGAM), Minard Run Oil Co. – the nation’s oldest family-owned and operated independent oil producer – and others sued Attorney General Eric Holder, the U.S. Forest Service and its officials, and three environmental organizations. At stake in the case are private property rights, high-paying jobs in one of the most depressed regions of the country and the search for energy in one of the hottest gas prospects nationwide.

“The ANF covers 500,000 acres in Elk, Forest, McKean and Warren counties in northwestern Pennsylvania. Because the lands within the ANF were once privately owned and were purchased during the 1920s and because the United States bought only the surface, most oil, gas and mineral (OGM) rights in the ANF (93 percent) are privately owned. Thus, there is no basis for any federal government regulatory authority over those rights. In fact, federal law, Forest Service regulations and federal and state court rulings say the agency has no such authority!

“Under Pennsylvania law, owners of OGM rights may go on the surface to access their property and may occupy so much of the surface as necessary to do so; however, the law provides for accommodation. OGM rights must be exercised with “due regard” for surface owners’ interests. That the United States owns the surface does not change the law: Like every other surface owner, the United States can do nothing – short of a lawsuit – to deny OGM owners access to their property. This was affirmed, as to a state agency, in a 2009 Supreme Court of Pennsylvania ruling. Therefore, the Forest Service has few options in dealing with OGM rights in the ANF, which is in accordance with the agency’s longstanding practice set forth in the Forest Service Manual. OGM rights must be exercised with “due regard” for surface owners’ interests. That the United States owns the surface does not change the law: Like every other surface owner, the United States can do nothing – short of a lawsuit – to deny OGM owners access to their property. This was affirmed, as to a state agency, in a 2009 Supreme Court of Pennsylvania ruling. Therefore, the Forest Service has few options in dealing with OGM rights in the ANF, which is in accordance with the agency’s longstanding practice set forth in the Forest Service Manual. This was recognized by a 1980 Pennsylvania federal district court ruling, which Congress adopted in the Energy Policy Act of 1992.

“For decades, the Forest Service adhered to the law and responded to an operator’s 60-day notice of its plans with consultations and a “notice to proceed,” which is not a decision by the Forest Service to allow OGM activity because, again, the Forest Service has no power over OGM rights. Nonetheless, in March 2007 the Forest Service announced its decision to conduct National Environmental Policy Act (NEPA) studies on any plans to develop OGM rights in the ANF. NEPA only applies to “major federal actions,” which means issues as to which the agency has discretion; the Forest Service has no such discretion regarding OGM rights. The Forest Service’s decision is now the subject of litigation.

“Meanwhile, in November 2008 environmental groups – recognizing that the Forest Service would lose its attempt to impose NEPA on its own – sued the Forest Service and asserted that a “notice to proceed” is subject to NEPA. After OGM owners intervened, federal lawyers signed a hastily executed “Settlement Agreement,” and the lawsuit was dismissed.

“The resultant lawsuit by POGAM and Minard Run is just beginning; however, it may well reach the U.S. Supreme Court where a favorable ruling is essential to the preservation of freedom, not to mention the search for energy in the United States!”